Kenneth Duplechain v. Firooz Jalili

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

10-736

KENNETH DUPLECHAIN, ET AL.

VERSUS

FIROOZ JALILI, ET AL.

**********

APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. C-20063905
HONORABLE THOMAS R. DUPLANTIER, DISTRICT JUDGE

**********

ULYSSES GENE THIBODEAUX
CHIEF JUDGE

**********

Court composed of Ulysses Gene Thibodeaux, Chief Judge, Marc T. Amy, and Billy
Howard Ezell, Judges.

Amy, J., concurs in the result and assigns separate reasons.

REVERSED AND RENDERED.

Steven Broussard
802 South Huntington
Sulphur, LA 70663
Telephone: (337) 527-7006
COUNSEL FOR:
Plaintiff/Appellant - Kenneth Duplechain, et al.

John Elliott Baker
Special Assistant Attorney General
321 N. Vermont Street - #208
Covington, LA 70433
Telephone: (985) 867-9068
COUNSEL FOR:
Defendant/Appellee - State of Louisiana

Randall Earl Hart
Broussard & Hart, LLC
1301 Common Street
Lake Charles, LA 70601
Telephone: (337) 439-2450
COUNSEL FOR:
Plaintiff/Appellant - Kenneth Duplechain, et al.

Nadia Marie de la Houssaye
Jones, Walker, Waechter, Poitevent, Carrère & Denègre, L.L.P.
P. O. Drawer 3408
Lafayette, LA 70502-3408
Telephone: (337) 262-9000
COUNSEL FOR:
Defendant/Appellee - Louisiana Patients’ Compensation Fund

THIBODEAUX, Chief Judge.

The plaintiffs-appellants, Cynthia Duplechain, individually and in her

capacity as the administratrix of the estate of her minor son, Conner Duplechain, and

Kenneth Duplechain (the Duplechains), appeal the denial of their motion for summary

judgment. The Duplechains’ motion sought a determination that they were entitled

to recover legal interest on medical bills paid by Medicaid through the Louisiana

Department of Health and Hospitals (DHH/Medicaid). The defendant-appellee from

whom the interest is sought in this matter is the Louisiana Patients’ Compensation

Fund (PCF).

The trial court found that the Duplechains were required to assign their

recovery rights to DHH/Medicaid and that they had no right to recover legal interest

on the medical payments made by DHH/Medicaid. Finding that the trial court erred

as a matter of law in interpreting the applicable statutes, we reverse the judgment of

the trial court and grant summary judgment in favor of the Duplechains.

I.

ISSUE

We must decide whether the trial court erred as a matter of law in

denying summary judgment to the plaintiffs on the issue of whether legal interest is

due on medical bills paid by Medicaid.

II.

FACTS AND PROCEDURAL HISTORY

In December of 2003, five-month-old Conner Duplechain was severely

injured when Dr. Firooz Jalili, a pediatric gastroenterologist, perforated Conner’s

esophagus during a routine endoscopy. Dr. Jalili mistakenly inflated Conner’s

mediastinum and blocked blood flow to Conner’s heart, putting him in cardiac arrest

and leaving him with a severe and irreversible hypoxic brain injury. Seven years

later, Conner is fed through a tube, is cortically blind, cannot walk, talk, or sit up, and

his condition is permanent.

The Duplechains filed a claim with the PCF. The Medical Review panel

found in favor of Dr. Jalili. The Duplechains filed suit, and DHH/Medicaid filed an

intervention for the $96,070.32 that it had paid in medical bills on behalf of Conner.

Five years later, after the Duplechains had accumulated litigation expenses estimated

at over $120,000.00, Dr. Jalili settled his liability in the case for $100,000.00. The

Duplechains sought all remaining damages from the PCF, with full legal interest on

their damages. They entered into a partial settlement with the PCF on all issues

except (1) past custodial care costs, plus interest, and (2) the legal interest on the

portion of damages paid by Medicaid.

On May 19, 2009, a judgment was rendered granting Mrs. Duplechain

the authority to settle the claims against Dr. Jalili and the PCF for $1,020,000.00.

The PCF funded the settlement, including the $96,070.32 Medicaid lien. The PCF

paid legal interest on $400,000.00 in general damages and on $279,999.88 in medical

bills paid by an ERISA lienholder, Blue Cross/Blue Shield of Georgia.

The Duplechains negotiated with DHH/Medicaid for a lien reduction and

ultimately paid Medicaid $86,463.29. Hence, the Medicaid lien has been reimbursed,

and DHH/Medicaid is not making a claim for any additional funds.

The PCF ultimately settled with the Duplechains for the past custodial

care, plus interest, and the only claim remaining for trial was the legal interest on the

Medicaid-paid damages of $96,070.32. The Duplechains filed a motion for summary

judgment on that issue, and the trial court entered a judgment denying their motion

in February of 2010. The Duplechains filed this appeal on the denial of their motion

2

for summary judgment on the issue of legal interest on Medicaid-paid damages. This

is a matter of first impression. Finding no support for the trial court’s judgment, and

finding error in the trial court’s interpretation of the applicable statutes, we reverse

for the reasons more fully set forth below.

III.

LAW AND DISCUSSION

Standard of Review

When an appellate court finds that a reversible error of law was made in

the trial court, it must conduct a de novo review of the entire record. Rosell v. ESCO,

549 So.2d 840 (La.1989). Appellate courts perform a de novo review upon a motion

for summary judgment. Guilbeaux v. Times of Acadiana, Inc., 96-360 (La.App. 3 Cir.

3/26/97), 693 So.2d 1183, writ denied, 97-1840 (La. 10/17/97), 701 So.2d 1327.

The Trial Court’s Judgment

The Duplechains contend that the trial court erred as a matter of law

when it ruled that legal interest does not accrue in favor of the plaintiffs on medical

bills paid by Medicaid. We agree. In its judgment denying the plaintiffs’ motion for

summary judgment, the trial court stated:

This court finds that legal interest in favor of the Plaintiffs
is not earned on the amounts paid by Medicaid. Because
the statutes governing Medicaid require the Plaintiffs to
assign recovery rights to the Louisiana Department of
Health and Hospitals, Plaintiffs have no right to recover
legal interest on such sums.

The trial court’s judgment reflects an erroneous interpretation and

application of the Medicaid statutes. DHH/Medicaid was reimbursed in this case; its

lien or privilege was paid. Therefore, neither the right to recovery by DHH/Medicaid,

nor the assignment of rights by the plaintiffs is at issue.

3

More specifically, La.R.S. 46:446(A) provides DHH/Medicaid with a

right of intervention and a right of recovery against liable third parties for amounts

paid by Medicaid on behalf of the tort victim. Likewise, La.R.S. 46:446(F) creates

a privilege in favor of Medicaid to be reimbursed its payments out of any recovery

the tort victim collects from a third person or insurance company, whether by

judgment or settlement or tender. In general, this means that Medicaid gets

reimbursed before the tort victim takes ownership of the proceeds of his or her claim.

However, the privilege is not exclusive, nor is it first-ranked, as La.R.S. 46:446(F)

specifically places the attorney’s privilege over that of Medicaid. Additionally,

La.R.S. 46:446(H) holds third parties, insurers, and attorneys responsible to

DHH/Medicaid for reimbursement of the lien for the amount of the privilege.

The Medicaid statutes further provide that where Medicaid has paid for

health care items or services furnished to an individual, and a third party has legal

liability to make those payments, “the state [DHH] is deemed to have acquired the

rights of the individual to payment by any other party for those health care items or

services.” La.R.S. 46:446.2(D). Additionally, La.R.S. 46:153(E) provides that the

Medicaid recipient “shall be deemed to have made an assignment to the department

[DHH] of his right to . . . benefits owed . . . by any third party.” Hence, there is a

statutory assignments of rights to DHH/Medicaid until Medicaid is reimbursed, but

the assignment of rights has nothing to do with legal interest owed by the tortfeasor.

In this case, the Duplechains satisfied the Medicaid lien and

extinguished their assignment of rights to DHH/Medicaid when their attorney wrote

a check for $86,463.29 to DHH/Medicaid on June 5, 2009, before the plaintiffs

received the funds from PCF in July 2009. DHH/Medicaid is not asserting a claim

for legal interest or additional funds in this case, and any assignment or obligation by

4

the plaintiffs has been fulfilled. Accordingly, as indicated above, neither

DHH/Medicaid’s recovery rights nor the plaintiffs’ assignment of rights is at issue.

The trial court concluded that any interest owed on the Medicaid

payment would be owed to DHH, not to the plaintiffs. This is also error. Louisiana

Revised Statutes 46:446.6 (B)(2) (emphasis added) provides that any health insurer

must “[a]ccept the department’s [DHH’s] right of recovery and the Medicaid

recipient’s assignment to the department of any right to payment from the health

insurer for an item or service for which payment has been made under the [Medicaid]

Program.” The recovery of Medicaid benefits from a recipient’s settlement of a tort

claim is limited to the medical expenses allocated in the settlement. Weaver v.

Malinda, 07-708 (La.App. 5 Cir. 2/19/08), 980 So.2d 55. Weaver relied upon

Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126

S.Ct. 1752 (2006).

In Ahlborn, the United States Supreme Court held that the federal

Medicaid law did not authorize an Arkansas state agency to assert a lien on a

Medicaid recipient’s settlement with third-party tortfeasors in an amount exceeding

the portion of the settlement representing medical expenses. The court held that 42

U.S.C. § 1396p, the federal anti-lien provision, affirmatively prohibited the state

Medicaid agency, the Arkansas Department of Health and Human Services (ADHS),

from asserting a lien for a larger amount.

The Ahlborn court further found that the federal third-party liability

provisions of the Medicaid statute, 42 U.S.C. § 1396k(a)(1)(A), required only that

recipients “assign the State any rights . . . to payment for medical care from any third

party,” not that they assign rights to other forms of payment. Further, where the

tortfeasor settled for only one-sixth of Ahlborn’s overall damages, and the state

5

stipulated that only $35,581.47 of the settlement was for medical expenses, the state

was limited to that amount, even though Medicaid had paid $215,645.30 to providers.

The court found that the requirement of 42 U.S.C. § 1396k(b), that Medicaid be

reimbursed before the plaintiff, did not show that Medicaid must be paid in full from

any settlement.

While Weaver and Ahlborn did not address the third party’s legal

liability for interest, those cases support our finding that the trial court erred at trial

in stating that any legal interest owed should be paid to Medicaid. We have been

unable to find a statute in the Medicaid scheme for recovery by Medicaid of legal

interest owed to the recipient/plaintiff by the tortfeasor or any other third party.

Legal Interest Under La.R.S. 13:4203

The Duplechains assert that La.R.S. 13:4203 is applicable to the question

of legal interest in all tort cases. It provides: “Legal interest shall attach from date

of judicial demand, on all judgments, sounding in damages, ‘ex delicto’, which may

be rendered by any of the courts.” The cases interpreting La.R.S. 13:4203 emphasize

that an award of legal interest in tort cases is not discretionary with the court. Turner

v. Ostrowe, 01-1935 (La.App. 1 Cir. 9/27/02), 828 So.2d 1212, writ denied, 02-2940

(La. 2/7/03), 836 So.2d 107; Odom v. City of Lake Charles, 00-1050 (La.App. 3 Cir.

1/31/01), 790 So.2d 51, writ denied, 01-1198 (La. 6/22/01), 794 So.2d 787. Legal

interest on judgments for damages in tort cases is an operation of law. The interest

attaches automatically until the judgment is paid regardless of whether it was prayed

for in the petition or mentioned in the judgment. Stewart v. Ice, 07-871 (La.App. 4

Cir. 4/9/08), 982 So.2d 928, writ denied, 08-1000 (La. 8/29/08), 989 So.2d 101.

Under La.R.S. 13:4203, the date of judicial demand is the date the

complaint is filed, not the date of judgment. Byrd v. Hunt Tool Shipyards, Inc., 650

6

F.2d 44 (5th Cir. 1981). When Section 4203 was enacted in 1916, it created a

substantive right to such interest in tort plaintiffs. With its enactment, the Louisiana

legislature’s primary purpose was to liberalize, not restrict, the existing judicial

approach to legal interest in tort cases. American Cyanamid Co. v. Electrical

Industries, Inc., 630 F.2d 1123, 1129-30 (5th Cir. 1980). There is no exception for

Medicaid-paid damages under La.R.S. 13:4203.

In its brief, PCF states that it “does not contest that interest accrues on

all tort damages and non-Medicaid medical bills from the date of judicial demand

through the date of settlement as is evidence[d] by the fact that the PCF has paid full

interest on said damages. Because there is no judgment casting the PCF with interest

on amounts paid to Medicaid the [p]laintiffs’ reliance on [La.]R.S. 13:4203 is

misplaced.” These statements are self-contradictory. The PCF admits to having paid

legal interest on the other tort damages, which includes the Blue Cross lienholder, and

there was no known “judgment” imposing interest on those amounts; yet, PCF seeks

to carve out an exception for amounts paid by and reimbursed to Medicaid. As stated

above, there is no exception under La.R.S. 13:4203 for Medicaid-paid amounts.

With regard to settlements, as PCF acknowledges, interest is paid on tort

damages recovered through settlements. In King v. Illinois National Insurance Co.,

34,473 (La.App. 2 Cir. 2/28/01), 782 So.2d 1104, 1111, writs denied, 01-1244, 01-

1245 (La. 6/22/01), 794 So.2d 788, Illinois National contended that the fixing of legal

interest from judicial demand “on all judgments” under La.R.S. 13:4203 was

inapplicable in its case since it had avoided judgment by its pre-trial tender of the

policy limits. However, the court found that the long-recognized principle for the

assessment of legal interest remained applicable for an insurer’s delay in tendering

its policy limits after the filing of suit. Similarly, we have held an insurer arbitrary

7

and capricious for failure to accept an offer to settle for the policy limits plus pre-

judgment legal interest where there is no real question of liability. See Hodge v.

American Fidelity Fire Ins. Co., 486 So.2d 233 (La.App. 3 Cir.), writ denied, 489

So.2d 917 (La.1986).

In the present case, the district court signed a judgment on May 19, 2009,

authorizing Cynthia Duplechain, as natural tutrix of Conner Duplechain, to

compromise the claims on the child’s behalf against Dr. Jalili and the PCF for one

million twenty thousand ($1,020,000.00) dollars. The judgment also authorized Ms.

Duplechain to release the parties and to receive and manage the settlement funds in

the manner and form prescribed by law. While this is not a judgment “casting” the

PCF with interest, it is a judgment on a settlement in a medical malpractice case, and

the statutes provide that pre-judgment interest attaches as a matter of law.

Legal Interest Under La.Code Civ.P. art. 1921

The Louisiana Code of Civil Procedure also provides for mandatory

legal interest. More specifically, La.Code Civ.P. art. 1921 states: “[t]he court shall

award interest in the judgment as prayed for or as provided by law.” The “shall” in

article 1921 is mandatory, and the court lacks discretion to deny interest if interest is

prayed for or is provided by law. Bickham v. Bickham, 02-1307 (La.App. 1 Cir.

5/9/03), 849 So.2d 707. In cases ex delicto and ex contractu, prejudgment interest is

awarded to make an injured party whole by compensating that party for the

time-value of money to which that party was entitled, but over which defendant had

wrongfully continued to exercise dominion and control while suit was pending.

Miller v. Conagra, Inc., 07-747 (La.App. 3 Cir. 12/5/07), 970 So.2d 1268, writ

granted, 08-21 (La. 3/7/08), 977 So.2d 915, affirmed in part, reversed in part, 08-21

(La. 9/8/08), 991 So.2d 445. All liability insurers owe interest on judgments in tort

8

cases, up to their policy limits, from the date of judicial demand. Edwards v.

Daugherty, 03-2103 (La. 10/1/04), 883 So.2d 932.

PCF is a Liability Insurer Under the Medical Malpractice Act

The PCF cites numerous Medicaid statutes and argues its obligations to

DHH/Medicaid as a “health insurer” under the Medicaid Scheme, La.R.S.

46:446.6(A)(2). The PCF, however, is an excess liability insurer under the Medical

Malpractice scheme which created it.

More specifically, La.R.S. 40:1299.42(B)(1) provides that the total

amount recoverable for all medical malpractice claims “shall not exceed five hundred

thousand dollars plus interest and cost.” The $500,000.00 cap does not include future

medical care and related benefits, which are provided for under La.R.S. 40:1299.43.

Louisiana Revised Statutes 40.1299.43(C) provides that a patient may make a claim

to the PCF for future medical care. Louisiana Revised Statutes 40:1299.43(D)

specifically states: “Payments for medical care and related benefits shall be paid by

the patient’s compensation fund without regard to the five hundred thousand dollar

limitation imposed in R.S. 40:1299.42.”

Louisiana Revised Statutes 40:1299.44, entitled, “Patient’s

Compensation Fund,” provides that the [PCF] board “shall issue payment” of

approved claims within thirty days of its receipt of a certified copy of a judgment,

settlement, or arbitration award, in excess of one hundred thousand dollars against

a health care provider. La.R.S. 40:1299.44(B). The PCF cannot contest liability

when there is a binding settlement for $100,000.00 by the health care provider, either

before or after trial. Bijou v. Alton Ochsner Medical Foundation, 95-3074 (La.

9/5/96), 679 So.2d 893. A settlement payment by the physician’s insurer triggers the

9

liability of the PCF. McDougal v. Blanch, 95-1377 (La.App. 1 Cir. 4/4/96), 672

So.2d 398, writ denied, 96-1129 (La. 6/7/96), 674 So.2d 973.

Once a qualified health care provider or its insurer pays $100,000.00 to

a medical malpractice victim, the liability of the health care provider is to be

considered as admitted and established pursuant to the statute regarding the PCF, and

the only contested issue remaining between the victim and the PCF is the amount of

the victim’s damages in excess of the amount already paid. Harrison v. Smith,

02-477 (La.App. 5 Cir. 11/26/02), 832 So.2d 1064, writ denied, 03-380 (La. 6/27/03),

847 So.2d 1277.

The plaintiffs are alleviated of the duty of proving the standard of care

and breach by the health care provider once the provider has paid the statutory limit

of $100,000.00 in settlement, which constitutes a statutory admission of liability; the

plaintiffs are then merely responsible for proving the extent to which the malpractice

caused damages in excess of the statutory limit, thereby making the PCF liable for the

balance of the uncompensated damages. Judalet v. Kusalavage, 00-59 (La.App. 3

Cir. 6/21/00), 762 So.2d 1128, writ denied, 00-2240 (La. 10/27/00), 772 So.2d 653.

None of the foregoing statutes or jurisprudence provides an exception

for Medicaid-paid tort damages, and the Medical Malpractice scheme specifically

provides for the payment of legal interest by the PCF on all malpractice recoveries

above $100,000.00.

Legal Interest Under the Medical Malpractice Act, La.R.S. 40:1299.47(M)

Under the Medical Malpractice Act, La.R.S. 40:1299.47(M) provides:

“[l]egal interest shall accrue from the date of filing of the complaint with the board

on a judgment rendered by a court in a suit for medical malpractice brought after

compliance with this Part.” Pursuant to La.R.S. 40:1299.41(A)(3), the “‘Board’

10

means the Patient’s Compensation Fund Oversight Board created in R.S.

40:1299.44(D).” Accordingly, the jurisprudence interpreting La.R.S. 40:1299.47(M)

specifically holds the PCF liable for interest on the plaintiffs’ damages after the first

$100,000.00 paid by the health care provider.

When medical malpractice victims compromised their action by settling

claims against qualified providers, they compromised their right to receive legal

interest on any amount of damages they might recover in a judgment against the

providers, but they did not compromise their right under the Louisiana Medical

Malpractice Act to receive legal interest against the PCF on any damage award up to

the $500,000.00 cap. See Castillo v. Montelepre, Inc., 999 F.2d 931 (5th Cir. 1993).

However, in 1991, La.R.S. 40:1299.42 was amended to provide that the medical

provider was liable for the first $100,000.00 plus the legal interest on that amount.

Accordingly, in Ceasar v. Barry, 04-1383 (La.App. 3 Cir. 2/2/05), 894 So.2d 571,

writ denied, 05-606 (La. 5/6/05), 901 So.2d 1097, we held the PCF liable to the

patient for $400,000.00 out of $500,000.00 plus interest on the $400,000.00 excess

judgment. See also, Futch v. Attwood, 97-259 (La.App. 3 Cir. 6/18/97), 698 So.2d

958, writ granted in part, 97-2664 (La. 2/6/98), 709 So.2d 721.

Our courts routinely hold that medical malpractice victims and survivors

are entitled to legal interest on the entire amount of the judgment, and no exception

is made for amounts paid by Medicaid. The Medical Malpractice Act provides that

legal interest accrues from the date of the filing of the complaint with the oversight

board and that the $500,000.00 cap on damages excludes interest and costs. State

Through Dept. of Social Services on Behalf of Harden v. Southern Baptist Hosp.,

94-2228 (La.App. 4 Cir. 10/12/95), 663 So.2d 443, writ denied, 95-2751 (La.

1/26/96), 666 So.2d 676. The medical provider/defendant is responsible for the first

11

$100,000.00 plus interest, and the PCF is responsible for all amounts, plus interest,

in excess of $100,000.00. See Watkins v. Lake Charles Memorial Hosp., 04-355

(La.App. 3 Cir. 12/15/04), 896 So.2d 130, writ denied, 05-145 (La. 4/8/05), 898

So.2d 1279; Patient’s Compensation Fund Oversight Bd. v. Succession of Hedgepeth,

98-1695 (La.App. 1 Cir. 9/24/99), 754 So.2d 1036, writ denied, 99-2962 (La.

12/17/99), 752 So.2d 857; Gladney v. Sneed, 32,107 (La.App. 2 Cir. 8/18/99), 742

So.2d 642, writ denied, 99-2930 (La. 1/14/00), 753 So.2d 215.

As previously indicated, the PCF acknowledges that it owes legal

interest on all other damages for which it is liable, and admits that it paid legal

interest on the Blue Cross amounts it covered. However, PCF attempts to carve out

an exception for amounts paid by Medicaid, where no exception exists. Those things

that the legislature wanted to exclude would be excepted explicitly. Such is not the

case here.

Purpose of Legal Interest

PCF argues that legal interest is intended to compensate the plaintiff for

money he was deprived of during litigation and that there was no deprivation of funds

here. The Duplechains argue that deprivation is not a prerequisite in assessing legal

interest because legal interest is paid on future damages. Under the Medical

Malpractice Act, La.R.S. 40:1299.43(C) provides that once a judgment is entered or

a settlement is reached between a patient and the PCF, and future medical care is

agreed upon, the patient may make a claim to the PCF for all future medical care and

related benefits made necessary by the malpractice. However, in medical malpractice

cases, future medical care is segregated from an overall award, and the interest on

future medical benefits is payable from the date of the filing of the complaint or from

12

the date that the expenses were incurred, whichever is later. Hall v. Brookshire Bros.,

Ltd., 02-2404 (La. 6/27/03), 848 So.2d 559.

The reference to legal interest designed to compensate ultimately

victorious plaintiffs for the time value (interest) of funds of which they have been

deprived, is based upon the notion that this is money which the plaintiffs could have

invested and earned interest on during the pendency of the litigation. See Futch, 698

So.2d 958. However, once an injured plaintiff has to file suit to enforce a right to

recovery, legal interest begins to accrue. The fact that Medicaid temporarily paid

damages assessed to Dr. Jalili and the PCF does not change the nature of the damages

or the plaintiff’s right to interest on those damages. In fact, research reveals that legal

interest accrues in tort cases, unless the plaintiff’s remedy is a non-monetary award.

See Scott v. American Tobacco Co., Inc., 04-2095 (La.App. 4 Cir. 2/7/07), 949 So.2d

1266, writs denied, 07-654, 07-662 (La. 1/7/08), 973 So.2d 740, cert. denied, 553

U.S. 1094, 128 S.Ct. 2908 (2008) (the jury award consisted of a smoking cessation

program as the plaintiffs’ remedy for the defendant tobacco companies’ conspiracy

to conceal the extent of nicotine addiction, and the non-monetary remedy did not

qualify for prejudgment interest).

In opposing the Duplechains appeal and seeking an affirmation of the

trial court’s judgment, the PCF argues that Bozeman v. Department of Transportation

and Development, 03-1016 (La. 7/2/04), 879 So.2d 692, is applicable in this case

because it holds that a plaintiff cannot recover amounts written off by a medical

provider who has reduced its fees due to Medicaid requirements. We disagree. The

only similarity between Bozeman and the present case is that both cases involved

Medicaid payments.

13

Bozeman had nothing to do with legal interest but rather addressed, as

a matter of first impression, the application of the collateral source rule to medical

expenses written off or contractually adjusted by health care providers pursuant to the

requirements of the Medicaid program. In Bozeman, the deceased motorist’s widow

sought to recover the full amount of the medical bills, even though the healthcare

providers had written off $266,879.92 of their bills in accepting payment from

Medicaid. The Louisiana Supreme Court found previous jurisprudence inconsistent

in deciding whether to apply the collateral source rule to Medicaid write-offs. In

discussing the three approaches used by other courts, the court in Bozeman rejected

the “reasonable value of services” approach which awarded the plaintiff the entire

amount of medical expenses that were billed to the plaintiff, including the written-off

amounts.

The Bozeman court also rejected the “actual amounts paid” approach

which denies the plaintiff the ability to recover the written-off amounts based upon

the reasoning that the plaintiff did not incur the written-off amount and an award of

that amount would result in a windfall to the plaintiff. The court agreed instead with

the reasoning that, if there is to be a windfall, it should enure to the benefit of the

injured party and not to the tortfeasor. The court agreed with and cited Griffin v. The

Louisiana Sheriff’s Auto Risk Assoc., 99-2944, p. 37 (La.App. 1 Cir. 6/22/01), 802

So.2d 691, 715, writ denied, 01-2117 (La. 11/9/01), 801 So.2d 376, which stated that

the proper focus of the inquiry is “on the nature of the write-offs vis-a-vis the

tortfeasor, rather than vis-a-vis the tort victim.” The Griffin court reasoned that the

existence or non-existence of an underlying obligation cannot form the basis for

applying the collateral source rule to write-offs because the result is a diminution of

14

the tortfeasor’s liability vis-a-vis an insured victim when compared with the same

tortfeasor’s liability vis-a-vis an uninsured victim.

After quoting the Griffin court for the above reasoning, the Bozeman

court opted to embrace a third approach called the “benefit of the bargain,” which

awards the plaintiff the full value of his medical expenses, including the write-off

amount, where the plaintiff has paid some consideration for the benefit of the written-

off amount. The Bozeman court distinguished Medicaid, a social service health care

provider for persons with low income and limited assets, from Medicare, which is

healthcare insurance funded by beneficiaries and their employers. The Bozeman

court articulated that while care of the nation’s poor is an admirable social policy,

“where the plaintiff pays no enrollment fee, has no wages deducted, and otherwise

provides no consideration for the collateral source benefits he receives, we hold that

the plaintiff is unable to recover the ‘write-off’ amount.” Bozeman, 879 So.2d at 705.

The court then concluded,

Medicaid recipients are unable to collect the Medicaid
“write-off” amounts as damages because no consideration
is provided for the benefit. Thus, plaintiff’s recovery is
limited to what was paid by Medicaid. However, in those
instances, where plaintiff’s patrimony has been diminished
in some way in order to obtain the collateral source
benefits, then plaintiff is entitled to the benefit of the
bargain, and may recover the full value of his medical
services, including the “write-off” amount.

Id. at 705-06.

It is clear that the Bozeman holding was narrowly tailored to the facts in

that case regarding the recovery of written-off medical bills pursuant to Medicaid

payments, and it is equally clear that Bozeman cannot be expanded to deny the

Duplechains legal interest on their damages. The Duplechains are not seeking a

recovery of written-off amounts above what Medicaid has paid. In fact, the Bozeman

15

court’s conclusion that the plaintiff’s recovery was limited to what Medicaid paid,

supports our determination that Medicaid payments for medical care are special

damages recoverable by the plaintiff. Therefore, interest accrues on those damages

as well.

Further, while the Bozeman court did not discuss the mandatory

reimbursement to Medicaid, it indicated that DHH had failed to intervene and was

denied its motion to withdraw funds from the registry of the court. In the present

case, Medicaid was reimbursed because the Duplechains hired a lawyer, filed suit,

and obtained the Medicaid recovery for DHH/Medicaid. Hence, the Duplechain’s

patrimony was diminished, and consideration was paid for the recovery of health care

costs.

As we previously stated, Bozeman had nothing to do with legal interest,

which is not a damage subject to being written off. In this case, Medicaid paid

$96,070.32 to medical providers on the Duplechains’ behalf. Medicaid was

reimbursed through the litigation efforts of the Duplechains, as their attorney re-

couped that amount from the liability insurer, PCF. Counsel for the Duplechains

negotiated a lien reduction with Medicaid for $86,463.29. Due to the Medicaid

privilege for the $96,070.32 that Medicaid paid to medical providers, the PCF paid

the full amount of the lien with knowledge of the reduction to the Duplechains, and

PCF raises no issue in that regard. Counsel for the Duplechains estimates his

expenses for the five years of litigation at over $120,000.00, which is a cost that the

Duplechains will bear.

Accordingly, there was more than ample consideration paid for the small

lien reduction of $9,607.03. The Medicaid statutes clearly recognize the recovery

efforts of the attorney. In fact, the Medicaid scheme at La.R.S. 46:446(F) specifically

16

provides that the attorney’s lien is ranked above that of Medicaid: “The privilege of

an attorney shall have precedence over the privilege created under this Section.” In

any event, the lien reduction was between the Duplechains and DHH/Medicaid and

had nothing to do with the medical provider’s original bill, write-offs, or any amounts

above what was paid by Medicaid.

Bozeman is not applicable here because the plaintiffs are not trying to

recover the amounts that the medical provider wrote off of its original bill when it

accepted $96,070.32 in payment from Medicaid. We have not been made aware of

the amount of that write-off because it is not at issue. The plaintiffs are merely trying

to recover statutorily-mandated legal interest on their damages, part of which were

paid by Medicaid, and which were fully recovered and reimbursed through the efforts

and expenses of their attorney, and therefore the plaintiffs themselves.

Medicaid-paid medical expenses are special damages clearly recoverable

by the tort victim. The legal interest on those damages is a mandatory compensation

to which the plaintiffs are also entitled. We have found no exception for avoiding

legal interest because part of the damages were paid by Medicaid, and we know of

no other public policy at issue. The Medical Malpractice statute makes it clear that

the PCF is not publicly-funded. Louisiana Revised Statutes 40:1299.44, entitled

“Patient’s Compensation Fund,” states in pertinent part:

The state recognizes and acknowledges that the fund and
any income from it are not public monies, but rather are
private monies which shall be held in trust as a custodial
fund by the state for the use, benefit, and protection of
medical malpractice claimants and the fund’s private health
care provider members . . . .

Legal interest is payable on tort damages under La.R.S. 13:4203, under

La.Code Civ.P. art. 1921, and under the Medical Malpractice Act at La.R.S.

40:1299.47(M). Neither the statutes nor the jurisprudence interpreting them provide

17

an exception for the portion of the plaintiff’s damages paid by and reimbursed to

Medicaid.

IV.

CONCLUSION

Accordingly, based upon the foregoing, the trial court’s denial of the

plaintiffs’ motion for summary judgment is reversed. Legal interest is due and owing

from the Patient’s Compensation Fund on the Medicaid-paid portion of the medical

damages of $96,070.32. The date of judicial demand in this case is the date that the

complaint was filed with the PCF, pursuant to La.R.S. 40:1299.47(M). Costs of this

appeal are assessed to the Patient’s Compensation Fund.

REVERSED AND RENDERED.

18

NUMBER 10-736

COURT OF APPEAL, THIRD CIRCUIT

STATE OF LOUISIANA

KENNETH DUPLECHAIN, ET AL.

VERSUS

FIROOZ JALILI, ET AL.

AMY, J., concurs in the result and assigns separate reasons.

Louisiana Revised Statutes 46:446(A) provided the Department of Health and

Hospitals with a cause of action for the damages at issue. A judgment reflecting the

costs for those damages would have properly included interest under the statutory

authority cited by the majority.

However, and also pursuant to La.R.S. 46:446(A), the DHH intervened in the

plaintiffs’ case rather than filing suit in its own right. Further, the DHH’s outstanding

cause of action for the damages at issue was subsequently extinguished by the

satisfaction of the lien by the plaintiffs. Whether the negotiations between the DHH

and the plaintiffs included consideration for the interest on the damages became a

contractual matter between the DHH and the plaintiffs. With the satisfaction of the

DHH lien, the right to pursue interest remained with the party who retained the cause

of action against the Louisiana Patients’ Compensation Fund. In this case, the

plaintiffs retained that cause of action. Accordingly, under the facts of this case, the

plaintiffs would have been able to recover the interest on the damages at issue, i.e.,

those previously paid by DHH and now repaid by the plaintiffs.

For these reasons, I respectfully concur in the result.